Fort Thomas, KY Mortgage Specialist

IF HOME BUYERS ARE SO SMART, THEN WHY AREN'T THEY GETTING PRE QUALIFIED?

No doubt most buyers are getting smarter all the time. With listings available on the Internet, most people have access to a computer and it is said most shopping for a home starts online, then it can be assumed home buyers really are getting more savvy.

Having said that, however, it befuddles me that the message to get pre qualified, to research loan programs available, to understand the buying process does not take place before a contract is written. Of my recent inquiries for a home purchase 2/3 wrote contracts before contacting a lender. Further, who are these Realtors writing offers for these people?

It can be costly to not get pre qualified. Along with qualifying home buyers I educate them about selecting a real estate agent to work with, what pitfalls to look for such as what properties can't be financed besides the loan process itself. Doing the prep work up front is so valuable I wish all home buyers would take that step to get pre qualified first. There are times it works out just fine to do things in reverse, but it can sure add some unnecessary angst.

Home buyers need to be smart and get pre qualified. My website has a lot of information for the Kentucky home buyer www.dagriffinfinancial.com.  Rather than spend a lot of time there, I am always happy to break it down in a phone conversation and supply a top list of mistakes made by home buyers as well as steps to take before buying a home.

MY LOAN IS BEING HELD HOSTAGE

The first email I opened this morning was from an Appraisal Managment Company advising me the first panel appraiser for the appraisal I ordered yesterday requested an additional $50.00 to complete the assignment.

I EQUATE THIS TO HOLDING MY LOAN HOSTAGE.

As a mortgage broker I must quote a borrower accurate fees for their loan.  I am not allowed to help this borrower out by paying the $50 for them even if I wanted to with the new loan officer compensation rules.

I've worked with this AMC for some time and I'm sure the appraiser did request additional funds, but I wonder about the real reason for the requested increase.  Is it likely because the AMC is taking 90 days to pay the appraiser? The property is located in a heavily populated area, immediately off the expressway and there are multiple comps for the same style and age home.

I find it infuriating that consumers are continually being asked to ante up more money for appraisals that are ordered through AMC companies. An appraisal like this would have cost the borrower $300 prior to HVCC/AIR. The cost has been $400 for about 6 months, and now the AMC wants $450. Delivery used to be within a week, now it is weeks. When are the powers that be going to wake up and realize how detrimental this process is to the economy and housing recovery!

Appraisers cry out to have their fees returned to the norm (prior to HVCC/AIR), but the only way this is going to happen is by the borrower paying a much higher fee to keep AMC's in the process. I feel sorry for appraisers who are working harder and being paid less, but I feel equally sorry for the home owner who is paying more for less. 

It is not fair, nor reasonable that every home owner is paying more and getting worse service because of those who were fixing appraisals not being prosecuted. Instead of prosecuting the wrong doers, rules were enacted affecting every appraisal. This seems to be the rule of the road these days - punish everyone.

WILL BANK WRITE DOWNS HELP SAVE HOUSING?

I find myself reviewing several articles on the above subject again today and I have to ask "will bank write downs help save housing?" And, how do I feel about that?

It seems everyone has an opinion on the subject. One school of thought is that a home purchase did not come with a guarantee of appreciation in value, so a commitment to pay should be valid even if the home is under water. Many of us have lost value in our homes.

I can understand this way of thinking. Each month as a home owner makes a payment that includes principal and interest, they get a little closer to owing the home outright.

A second school of thought is that a bank write down would indeed cut down on foreclosures, that home owners would stay and pay.  I'm sure there are some home owners out there who look at the situation and decide they won't pay for a home that lost significant value. I'm not convinced they represent a high percentage of foreclosures.

From my experience foreclosures are not because borrowers are upside down and they are walking, they simply cannot get a loan modified at a market rate or they have lost jobs or have a serious illness, something that is a once in a lifetime occurance, perhaps.  I wonder if the hype about writing down balances is just another stab in the dark that would not be helpful overall.

If banks were to write down balances, then how does that affect the general populace? Will those who did not need a write down think of the others as losers who could not follow through on their promise to pay, perhaps they got an undeserved break. In the long run who pays for the write down?

I know of a situation where the home has declined 50%. The home owner has a balloon mortgage that is coming due this year. The owner cannot get refinanced, even with the current mortgage holder because the value has dropped, the value cannot be proven. In this situation, why would the bank simply not refinance this home owner at the market rate on the balance owed, even if the home is only worth 60% of the face of the mortgage. In my book that beats a foreclosure. Keep this home owner on the hook for the entire balance, just make the payment fixed and as low as possible.

Bank write downs may cut back on some foreclosures, but when employment is an underlying problem, it may not go far in curing the foreclosure crisis.

HARPING ON HARP II

HARP II   is intended to be an improvement over the original refinance program for Fannie and Freddie.  Some things like the ability to go to 125% loan to value are still tricky because lenders may not go along. The one big benefit I see is that the loan level price adjustments can be much lower and that will open up more loans to be refinanced. Not all the changes are implemented yet, but should be in April.

During this time when low rates are so prevalent it would be sweet if everyone could refinance. There are still several things standing in the way for many, for instance if your loan is not Fannie or Freddie owned, or if credit or value is a problem. In these instances HARP II is not going to be the solution.

There is one key oops with HARP II that would have been extremely helpful to so many home owners, a requirement that the second mortgage be automatically subordinated. Since they are in second position already, what is the big deal by staying there for a more favorable loan to the borrower. There are a couple of states that do have this ruling even prior to HARP II.

As I write this I am dealing yet again with a lender who is taking over two months to say yes to subordinating their current second mortgage. This deal has a 70% front end and 81% back end. I've worked with this lender a lot in my career and would not have expected the 20 days they publish as their required processing time, but we could work with it.

After our request was submitted for two weeks, they tell me now they are working on the December 01 requests. Now we are looking at more than two months, and by the way, don't even think of asking for a RUSH. (I wouldn't because they would not recognize it I'm sure.)

(This particular loan does not require an appraisal for the first mortgage, the value was accepted by the automated underwriting system, but the second lien holder if they don't agree can order an appraisal, a further delay. Unfortunately one guide they use is Zillow, (can I insert a LOL here?). I've actually had this lender order an appraisal in a situation where there is NO MAXIMUM loan to value when they would not subordinate, wasting a borrowers money.)

While we wait, the borrower will lose his lock. Fortunately the rates have remained low, although it will cost him something to keep the rate I am sure. Then there is the question of when we may actually get the subordinated second. When they say they are working on Dec 01 requests, that does not mean we are six weeks out because as the customer service person said "they are not allowed to tell us what they think, only the day they are working on".

Most annoying about this scenario is the total lack of concern for someone who has a loan with this company. I cannot imagine a day that I could be so uncaring about a situation my borrower is in. The longest I've waited for a subordinated second was over 4 months. Too bad HARP II did not address this issue in a more logical way.

HOME OWNERS GET SET TO PAY FOR PAYROLL TAX CUT

HERE IS THE SUBJECT OF AN EMAIL I GOT FROM ONE OF MY LENDERS TODAY:

Conforming and Non-conforming prices will change based on recent Congressional action, worsening pricing

"Freddie Mac and Fannie Mae are increasing their Guarantee Fee (GFee) effective with April “settlements,” which will worsen pricing. (As a result this lender is factoring the fee beginning in February)

• The GFee increase will worsen prices by up to 80 bps depending on note rate."

This is the fee being charged to Fannie/Freddie for the PAYROLL TAX CUT that was extended for two months.

Loan level price adjustments have become commonplace since the housing collapse. In the past if a borrower received an "approve/eligible" reading on automated underwriting and the home was a primary residence, and they were putting down at least 5%,  there were no additional fees charged by Fannie/Freddie. Since the collapse there are fees depending upon loan to value and credit scores, among other features.

Suppose I have a borrower who has more than 40% equity, an 800 credit score he/she may not have to pay any fee currently.. . . . BUT

With the above change he/she will; they could pay the 80 bps out of pocket. (On a $100,000 loan this is only $80.00.) For some borrowers it would actually be financed into the rate with premium pricing. Unfortunately often it will be without knowledge of the borrower. Not every originator will break down the costs for the loan.

We in the industry knew this was coming when the announcement was made that the payroll tax cut was paid for by additional fees to Fannie/Freddie. While I agree the deficit is too high, I'm not sure I support one segment of our population paying for a payroll tax cut for everyone else.

COST OF PAYROLL TAX CUT IS REAL

HOORAY!!!!!!!!!  It appears the payroll tax cut has been extended for two months. The bad news is as I mentioned in an earlier blog the Senate bill had provisions for increased fees at Fannie, Freddie and FHA to "pay for" the tax reduction. The House has agreed to this.

As an example on a FHA loan the monthly MIP is 1.15%. To pay for the tax cut, it would go up 10 basis points to 1.25% a month. On a $100,000 loan this makes the monthly MIP $10.00 more, $120 more annually, and over ten years $1200.

Take this times the numbers of people who will get FHA loans and in ten years that is a lot of bread!  I don't see how Fannie and Freddie won't look similar when it comes down to it. They are not going to pay the government funds they can't recoup, especially when they are broke.

Everyone should give the home buyers and refinance-rs a big old pat on the back for putting the extra dough in their pockets.

PAYROLL TAX CUT

This week we are met with a Senate bill that antes up a two month extension to the payroll tax cut at the expense of homeowners!

The bill continues the reduced payroll taxes to particularly the middle class and extends unemployment benefits to others. It moves on to the House where hopefully it will NOT pass.

If the bill does pass the way it is now, then give the home owner who refinances next year, or buys a home a big hug.

Orchestrated by Kentucky's own Mitch McConnell it grants a mere two month extension to the payroll tax bill, and it is being paid for in large part by extra fees to Fannie Mae and Freddie Mac. In the past perhaps this was not so meaningful to most of us because we did not pay so much attention. Now,  those of us in the housing industry snap to attention at the mention of Fannie and Freddie.

Prior to the mortgage meltdown if one was not doing a special program, or investment property there were no extra Fannie Mae fees. Now since the meltdown, even those with credit scores over 740 can be subject to extra fees, called loan level price adjustments,  with a 620 credit score the fees are outrageous. It is the agencys' way of getting on the road to solvency again.

It does not take a rocket scientist to realize fees charged to Fannie and Freddie will be passed on to home owners when they buy or refinance. What are our Senators thinking? Do they not realize we are in a HOUSING CRISIS in this country? 

There are plenty of well qualified home owners right now who do not get to take advantage of the record low interest rates because the loan level price adjustments make it not feasible. Meantime, another Senator, David Vitter, LA,  is asking FHA to up MI to the highest level allowed.

How does this help housing recovery? How can our Senate be so out of touch with reality?

PAYROLL TAX HOLIDAY

Just when you are beginning to wonder if they will EVER get it in Washington, they come up with something new. The payroll tax "holiday" is under pressure to be extended.

The President and most Democrats and Republicans agree extending the payroll tax holiday would be a good idea. The problem is how to pay for it.

The President believes putting an extra $1000 a  year in the hands of the citizens would be a good thing especially in this economy. Who are we to disagree? Who couldn't  use an extra $1000?

The Dems want to tax the wage earners more who NET more than $1,000,000 a  year. The House, controlled by Republicans has passed a bill that ties the tax holiday to a Keystone Pipeline, Oil, that is, from Canada to Texas.

One idea both parties support is having Fannie and Freddie charge lenders MORE for the loans they buy. Yep, and what do you suppose would be the ultimate end to that folly. Consumers would end up paying for it. Consumers who are refinancing or purchasing a home would get that fee passed on to them through loan level price adjustments.

In the lending world, Fannie and Freddie charge lenders fees for delivery of loans. Lenders in turn charge borrowers fees for delivery. How near sighted of our senators and congressmen to THINK most of us would not recognize this for what it is. A price hike to those borrowing money. A further detriment to housing recovery.

While Washington is looking for some common ground, I believe more and more every day the middle class is finding common ground - we do not need representatives in Washington who are so far removed from our every day struggles.

CINCINNATI ZOO FESTIVAL OF LIGHTS

My family and I went to the Cincinnati Zoo Festival of Lights Monday night. As expected it was a lot of fun. We have a little one who was comfortably warm with layers of clothing and a blanket.

If you are expecting to see animals, there will be minimal sightings. Some of the "houses" are open such as the reptile house and manatee. The polar bear was sleeping, which was disappointing. There was a random sighting of a lynx. One of the handlers had an owl out.  I'm sure at different times there are different experiences in this regard.

One of the best parts of the experience was a puppet show. I would highly recommend this to any visitor.

Some concessions are open with hot drinks and food. As one would expect, eating at the zoo for humans is pretty expensive. We ate before we went, but could not resist the hot toasted cinnamon almonds.

The hours are 5- 9 nightly until January 1, 2012. There are 2 million lights and many great spots for pictures among the lights. Normally we purchase tickets ahead of time, but this time around we did not. I'd highly recommend a pre purchase to avoid the line once you get there. We had coupons for half off, which could not be used in the automated machines, so we had about a twenty minute wait. It was well worth it.

Visit the link below to get information on pre purchasing tickets and how to get coupons. Coupons are not valid every day.

If a visit to the Cincinnati Zoo Festival of Lights is in your plans, it is a great way to spend a few hours with family and just as important, all the visitors were in great Christmas mood!

http://cincinnatizoo.org/events/festival-of-lights/

WHO IS RUNNING THE CFPB?

Since the senate failed to confirm either Elizabeth Warren or Richard Cordray as director of the CFPB (Consumer Finance Protection Agency), then who is running it in the absence of a director? In the interim the acting director is Raj Date. His resume includes Capital One and Deustche Bank.

I wonder when I read that what he thinks now and thought then about his employer's credit card activity?

As this drama goes on and on in Washington, it makes me pause to consider the persons who are employed by the CFPB, the rules they are writing, the money spent to pay them, and how enforceable the rules are they are writing? My understanding is that rules regarding non banking entities are not enforceable without a director.

The CFPB is an agency that writes it own budget, answers to no one and cannot be restrained except in the case of a threat to national financial well being.

A quote from Timothy Geithner:

"The longer we wait to confirm a director, the more we’re leaving millions of Americans who aren’t doing business with banks vulnerable to the kind of predation and abuse that caused so much damage in this crisis,” Geithner said, quoted in the Treasury blog post. “That’s not something we find acceptable.”"

I understand this quote was directed toward the pay day loans.

Why even consumers may not be 100% behind a CFPB: So far every act that has come from Washington or the Feds to "help" the consumer has:

1) Hamstrung the consumers ability to get home financing,

2) Caused devastating financial loss to countless appraisers and mortgage professionals,

3) Driven up costs for the consumer for housing financing,

4) Reduced the sources of financing.

5) Not only  made the mortgage loan documents more difficult to understand, but doubled the physical size of the loan package.

Given this track record, many are "underwhelmed" with the prospect of another government agency having more powers.

The CFPB is to have a budget of a half million dollars a year. The Republicans are fighting accepting a single director vs a board for the agency, and they want an agency like FDIC to have the ability to override the CFPB . I would not prefer a board over a single director, and certainly the CFPB doesn't need to be set up with another agency having a power of veto.

My take on the CFPB is that there is not enough money in the budget to have one group stick its nose into every consumer transaction in this country. There is not enough money to enforce the rules imposed by the CFPB. With all the changes that have been made by the Feds and Washington, it has not stopped appraisal or loan fraud. Every time I speak with a consumer who tells me the interest rate they are quoted and I know they are being lied to I am further convinced the government cannot save us all, nor should they.

Will a director ever be named. Probably, maybe even during recess.